Notes on this page:
General notes:
Global economic conditions improved throughout 2010 yet remained challenging. Against this backdrop, it is pleasing that we have achieved stronger results for our shareholders, our customers and our people.
For the first time, our 2010 Annual Review integrates financial results and corporate responsibility outcomes, reflecting our belief that reputation and performance ultimately go hand in hand. Doing the right thing, helping customers and communities, and realising potential are central to NAB’s organisational purpose and long-term success.
Our result reflects progress on many fronts. We continue to execute our strategy, and are achieving progress against each of our four priorities:
- Focusing on the strong Australian franchise while maintaining options internationally.
- Improving efficiency, quality and service.
- Maintaining balance sheet strength.
- Investing in our people, culture and reputation.
NAB’s balance sheet settings have remained strong and we are well positioned for future regulatory change and balance sheet growth, and to efficiently raise money from wholesale funding markets and attract customer deposits.
We have kept the bank safe during a difficult economic period and carefully managed costs. NAB’s 2010 wholesale funding program was raised without use of government guarantees, and we continued to issue longer dated debt to minimise refinancing risk. The ratio of customer deposits as a percentage of core assets also improved during the year.
Our 19.3% cash earnings growth reflects NAB’s continued strength in Business Banking and Wealth, and renewed momentum in Personal Banking.
BUSINESS BANKING
Business Banking recorded a strong increase in earnings, despite subdued system credit growth, reflecting better underlying profit performance, increased lending, and lower bad and doubtful debt charges.
In 2010, NAB strengthened its leading market position in Business Banking and continued to support Australian businesses. Over the 17 months to August 2010, NAB increased lending by a net $1.9 billion at a time when the industry contracted its lending by an aggregated $40 billion net.1
During the year, 209 new business bankers and specialists were hired, taking the total to more than 360 since the recruitment program was launched in 2009. Seven new Business Banking Centres opened and business lending and business deposit growth was strong.
We continue to enhance our integrated Financial Solutions (iFS) model through new initiatives designed to deepen customer relationships and achieve stronger cross sell. These include co-location of specialists with bankers, a new dedicated small business call centre and a broader project with Personal Banking to improve service levels to Small and Emerging Businesses.
1 APRA Monthly Business Statistics, August 2010/NAB adjusted dataMLC & NAB WEALTH
MLC & NAB Wealth continued to perform well and consolidated its market leadership in key segments.
For several years, MLC & NAB Wealth has led the industry with initiatives to improve trust and transparency in financial planning, particularly in the area of fees versus payment of product commissions. This approach has been reinforced by recent government reforms and positions us as a sustainable business for the future.
Cost synergies from the integration of Aviva are ahead of business case expectations and the strategic alliance with JBWere has expanded MLC & NAB Wealth’s capabilities in direct equities.
nabInvest, which utilises MLC & NAB Wealth’s capabilities to identify quality asset managers, now has investments in seven asset managers in the areas of global equities, infrastructure and property. Attractive new asset management relationships continue to be considered.
PERSONAL BANKING
For some time now, NAB’s Australian Personal Banking franchise has been an area in which we were not as strong as we could be. Addressing this has been part of our strategic focus in 2010. While much remains to be done, early results are encouraging.
NAB’s work to rebase the Personal Banking business and improve its market position and reputation included the abolition of a range of banking fees that in many markets overseas are no longer considered part of a sustainable long-term business.
This work means frontline people can spend more time serving customers, which is contributing to an increase in new customers, improved customer retention and satisfaction, and a substantial reduction in customer complaints.
Momentum is returning to NAB’s Personal Banking business. In 2010, we experienced strong growth in new mortgages, with NAB recording 1.7 times system growth.
Pleasingly, asset quality measures of new lending were at, or better than, existing loan asset quality.
UBank’s USaver product was a key contributor to Personal Banking’s strong growth in household deposits.
WHOLESALE BANKING
Our strategy for Wholesale Banking to provide products and services across the Group’s franchises included significantly increasing the number of Wholesale Banking product specialists co-located in Business Banking Centres, and a successful campaign to market foreign exchange services to business customers.
The Wholesale business also plays an important role in supporting the growth in Australia’s infrastructure, energy and utilities, and natural resources sectors. Our expertise in project finance and global markets aims to capitalise on the funding and cross-sell opportunities presented by the anticipated growth in all three sectors.
Our Asset Servicing business maintained its number one position in the securities custody market in Australia.
INTERNATIONAL BUSINESSES
Among NAB’s international businesses, New Zealand Banking delivered a strong result, with continued cost discipline in a slowly recovering economy. Innovation remained a hallmark of this business, with NZ Banking opening refreshed retail stores, new business centres and a dedicated small business hub, and launching patented anti-fraud credit card technology.
In step with a stabilising United Kingdom economy, UK Banking earnings have improved, with higher net interest income as a result of repricing, lower funding costs, and reduced charges to provide for bad and doubtful debts.
Great Western Bank increased earnings and its distribution with the bolt-on acquisitions of F&M Bank in Iowa and the banking franchise of TierOne Bank in Nebraska.
BUSINESS EFFICIENCY AND INVESTMENT
The Group’s focus on costs continued, with underlying expense growth (excluding currency and acquisitions) at 3.8%, reflecting ongoing investment in frontline resources, systems and technology. The Efficiency, Quality and Service (EQS) agenda continued to reshape our business, reduce duplication and position the Group to better serve our customers.
PEOPLE, CULTURE & REPUTATION
Throughout 2010, we have made demonstrable headway in the areas of people, culture and reputation. The staff survey conducted during the year shows employee engagement has improved, and NAB’s people are focused on delivering against the Group’s strategic priorities and growing our business.
For the fourth year in a row, NAB was recognised as an Employer of Choice for Women by the Equal Opportunity Workplace Agency (EOWA) and was the only major Australian bank to make the list in 2010.
NAB Group invested over $61 million in the communities in which we operate this year, focusing on education, financial inclusion and our Reconciliation Action Plan.
Highlights included NAB’s Schools First program, a partnership between NAB, the Australian Council for Educational Research and The Foundation for Young Australians, which has provided more than $10 million in awards to nearly 200 schools in its first two years.
NAB’s microfinance program provides access to safe, fair and affordable financial services and has now become one of the largest of its kind in a developed economy.
In line with our undertakings on sustainability, NAB also became carbon neutral this year.
SUMMARY
We began the year as one of the safest banks in the world, having remained strong through the global financial crisis. As conditions begin to improve, we are effectively implementing our strategic agenda, and it is pleasing that our progress is tangible and reflected in a range of improved results. I look forward to achieving further progress in 2011.
Cameron Clyne
Group CEOCameron Clyne
Group CEO
